Option Value: A Conceptual Overview

The importance of nonuser benefits to the process of efficiently allocating natural environments was first emphasized by Krutilla [15] a decade and a half ago. One of the components of these nonuser benefits is option value. Originally introduced by Weisbrod [23] as relevant for assets that might be difficult to reproduce, option value has been the subject of considerable debate. Perhaps the simplest approach to explaining the meaning of option value is to use an example. Consider an individual who is uncertain whether he (or she) will consume the services of a particular asset in the future. Furthermore, assume this individual is also uncertain whether the asset will be available in the future should he